https://www.nber.org/digest/202212/concentration-high-tech-workers-has-benefits-and-costs Skip to main content * Subscribe * Media * Open Calls Close Search [ ] * Research EXPLORE Research + Findings o Working Papers o Books & Chapters o Lectures o Research Spotlights + Periodicals o The Digest o The Reporter o The Bulletin on Retirement and Disability o The Bulletin on Health o The Bulletin on Entrepreneurship o Periodicals Archive + Data & Business Cycles o Boston Research Data Center o Business Cycle Dating o Public Use Data Archive + All Topics o COVID-19 o Unemployment and Immigration o Energy o Entrepreneurship o Trade * Programs & Projects EXPLORE Programs & Projects + Programs o Economics of Aging o Asset Pricing o Children o Corporate Finance o Development Economics o Development of the American Economy o Economic Fluctuations and Growth o Economics of Education o Environment and Energy Economics o Health Care o Health Economics o Industrial Organization o International Finance and Macroeconomics o International Trade and Investment o Labor Studies o Law and Economics o Monetary Economics o Political Economy o Productivity, Innovation, and Entrepreneurship o Public Economics + Working Groups o Behavioral Finance o Chinese Economy o Cohort Studies o Economics of Crime o Entrepreneurship o Household Finance o Innovation Policy o Insurance o Market Design o Organizational Economics o Personnel Economics o Race and Stratification in the Economy o Risks of Financial Institutions o Urban Economics + All Projects & Centers o Boosting Grant Applications from Faculty at MSIs o Center for Aging and Health Research o Conference on Research in Income and Wealth o Early Indicators of Later Work Levels, Disease and Death o Economics of Digitization o Gender in the Economy o Improving Health Outcomes for an Aging Population o Macroeconomics Annual o Measuring the Clinical and Economic Outcomes Associated with Delivery Systems o Oregon Health Insurance Experiment o Retirement and Disability Research Center o The Roybal Center for Behavior Change in Health o Science of Science Funding o Training Program in Aging and Health Economics o Transportation Economics in the 21st Century * Conferences * Affiliated Scholars * NBER News EXPLORE NBER News + Research in the News + Nobel Laureates + Featured Working Papers Archive * Career Resources EXPLORE Career Resources + RA Positions - at NBER + RA Positions - not at the NBER + Staff Positions at NBER + Calls for Fellowship Applications + Current Fellowship Recipients + PhD Candidates in Economics * About EXPLORE About + Leadership & Governance + Support & Funding + History + Standards of Conduct + Privacy Policy + Staff * Subscribe * Media * Open Calls Search [ ] * More in this issue The Digest: No. 12, December 2022 Subscribe Concentration of High-Tech Workers Has Benefits -- and Costs Share Twitter LinkedIn Email Scientists and engineers tend to work more productively in high-tech-intensive cities. With more opportunities to network with their peers, they appear to benefit from knowledge spillovers, and their firms benefit from a larger labor pool. Productivity gains -- defined as the number of patents produced in a year -- increase steadily when firms in cities with smaller concentrations of research and development activity are compared to those in localities with larger concentrations, but production costs also increase. Gains outpace costs at low- to mid-level R&D concentrations, but the picture changes in urban areas with the highest agglomerations, such as Boston and San Francisco, where the difference between productivity gains and cost increases is close to zero. Productivity increases at a steady rate as clusters of scientists and engineers grow larger, but associated R&D costs rise more rapidly at higher levels of agglomeration. In Place-Based Productivity and Costs in Science (NBER Working Paper 30416), Jonathan Gruber, Simon Johnson, and Enrico Moretti estimate R &D costs for 133 metro areas and assess how productivity varies with the density of scientists. They build on Moretti's earlier work to show that researchers located in an area with 10 percent more scientists in their field produce 0.7 percent more patents per year. Productivity increases at a steady rate as clusters of R&D workers become more concentrated; however, R&D costs rise more rapidly at higher levels of agglomeration. This means that increased productivity delivers diminishing net returns to the firms carrying out this research. The researchers find that, overall, R&D spending in an area with 10 percent more scientists is 0.1 percent more costly -- well below the productivity gains delivered by agglomeration. But while the productivity gains from adding more scientists do not vary much by area, the costs of R&D do vary. In particular, in the cities with the highest concentration of scientists, each additional 10 percent increase in the number of scientists increases costs by 0.53 percent. This estimate is somewhat less than the estimated increase in productivity in these cities, but the researchers cannot reject the possibility that the two effects are of the same magnitude, that is, that cost increases are equal to the productivity gains. The most expensive US metro areas in which to conduct R&D are San Jose-San Francisco-Oakland; Honolulu; and Boston-Worcester-Manchester. The least expensive are Dayton-Springfield-Greenville; Milwaukee-Racine-Waukesha; and Grand Rapids-Muskegon-Holland. The cost of doing business is 38 percent higher at the top than at the bottom, and the difference in the cost of housing is even greater, ranging between 49 and 99 percent depending on the location. R&D has become increasingly concentrated. As of 2009, the top 10 metro areas for computer science accounted for 70 percent of all US inventors, for semiconductors 79 percent, and for biology and chemistry 59 percent. Congress is considering legislation that could provide incentives for R&D activity in new tech hubs instead of what the study calls "existing coastal superstar cities." The researchers identify, but do not quantify, three potential benefits associated with greater dispersion of technology-intensive R&D jobs: bringing new jobs to depressed regions, reducing the national economy's vulnerability to geographic shocks such as hurricanes and earthquakes, and generating broader political support for science spending by increasing the voter base it would benefit. --Steve Maas NBER Today Working paper Figure w30568 Social Distancing Desires Keep Some Out of the Labor Force The Value of Intangible Capital figure The Value of Intangible Capital The graph is a bar chart titled "Spillovers to Neighboring Startups by Proximity and Access to Common Areas." It shows the percentage point increase in the probability of startups adopting peer web technology by physical proximity to neighboring startups and whether startups have access to a common area shared with another startup. For startups within 20 meters of each other, and for those both with and without a common area, the increase in probability is between around 3 and 3.5 percentage points. How Startup Chemistry and the Coworking Environment Related Topics Public Economics Labor Economics Regional and Urban Economics Programs International Trade and Investment Labor Studies Public Economics Productivity, Innovation, and Entrepreneurship Working Groups Innovation Policy Urban Economics Projects Economics of Entrepreneurship Papers Place-Based Productivity and Costs in Science Also in this issue: * Social Distancing Desires Keep Some Out of the Labor Force * The Real Interest Rate Decline in Long Historical Perspective * Low-Skill Foreign Employees' Impacts on US Firms and Workers * The Contribution of International Students to US Labor Supply * Tracking a Decade-Long Appreciation of the US Dollar More from NBER In addition to working papers, the NBER disseminates affiliates' latest findings through a range of free periodicals -- the NBER Reporter, the NBER Digest, the Bulletin on Retirement and Disability, the Bulletin on Health, and the Bulletin on Entrepreneurship -- as well as online conference reports, video lectures, and interviews. 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